JP firms gain 3% each on asset sale to Rel Power

Shares of Jaiprakash Associates and its subsidiary Jaiprakash Power Ventures climbed 3 per cent each in Mumbai on Monday after Reliance Power signed a mem­orandum of understanding to buy the formers’ entire hydro-power business for an undisclosed amount.

Jaiprakash Power Ventures surged as much as 8.70 per cent in early trade. It eventually ended at Rs 19.55, up 3.17 per cent.

“The deal should help JP Power Ventures meet its debt obligations and finance its under-construction projects,” said Venugopal Garre of Barclays. Shares of parent firm Jaiprakash Associates jumped 5.30 per cent in the morning session, but eventually closed 2.95 per cent higher at Rs 62.50. Reliance Power ended 3.47 per cent higher at Rs 94.

JP Power Ventures’ earlier deal to sell two of its three hydro-power projects to a TAQA India Power Ventures-led consortium was called off by the latter last week, which put the stock under pressure. The deal will help JP Associates cut debt, which stood at Rs 61,100 crore in FY14.

“We have valued the three assets at a total enterprise value of Rs 17,100 crore on EV/Ebitda basis,” said Edelweiss Securities.